2017 (7) TMI 577 - HC - Indian Laws

Dishonor of cheques - complaint under N.I. Act - Held that - In the present case five post-dated cheques were handed over to non-applicant not as a security but for said payment with a stipulation that when the amount of ₹ 24 lakhs would be paid by applicant to the non-applicant then only the same were to be returned. As such the cheques issued were meant to discharge a debt or liability within the meaning of Section 138 of N.I. Act. The present petitions filed by the applicant are not maintainable. Learned Courts below have not committed any legal error in dismissing the application. No interference is required in these petitions under Section 482 of Code of Criminal Procedure, as prayed is made out.

Summary

Issues Involved:
1. Quashment of proceedings under Section 138 of the Negotiable Instruments Act, 1881.
2. Validity of cheques issued as security.
3. Binding nature of civil court judgments on criminal proceedings.

Issue-wise Detailed Analysis:

1. Quashment of Proceedings under Section 138 of the Negotiable Instruments Act, 1881:
The applicant filed a petition under Section 482 of the Code of Criminal Procedure, 1973, seeking to quash the order dated 11.9.2015, which upheld the Judicial Magistrate's decision to reject the application for quashment of proceedings under Section 138 of the Negotiable Instruments Act, 1881. The applicant argued that the cheques were issued as security and not for encashment, and the non-applicant violated the terms of the mutual agreement by presenting the cheques without settling accounts or executing the MOU.

2. Validity of Cheques Issued as Security:
The applicant contended that the cheques were handed over as security for liabilities that might arise after the settlement of accounts and execution of the MOU. The non-applicant presented the cheques for encashment without fulfilling these conditions. The applicant had instructed the bank to stop payment and communicated this to the non-applicant. The court noted that if cheques were issued for security, then an offence under Section 138 of the N.I. Act is not made out. However, the court also referenced several judgments, including the Apex Court's ruling in Don Ayengia Vs. State of Assam, which held that cheques issued for discharging a debt or liability, even if termed as security, are subject to Section 138 if the conditions of the liability are met.

3. Binding Nature of Civil Court Judgments on Criminal Proceedings:
The applicant argued that the civil court's judgment, which declared that the non-applicant could not encash the cheques without executing the MOU, should be binding on the criminal proceedings under Section 138. The court referenced the Apex Court's decision in Syed Askari Hadi Ali Augustine Imam and another vs. State (Delhi Administration), which held that judgments of civil courts are not binding on criminal courts. The court further noted that the criminal complaint was filed before the civil suit was decided, and the dishonor of cheques occurred before the civil suit was filed.

Conclusion:
The court concluded that the cheques were not issued merely as security but were meant to discharge a debt or liability within the meaning of Section 138 of the N.I. Act. The petitions filed by the applicant were not maintainable, and the learned courts below did not commit any legal error in dismissing the application. The court dismissed the petitions under Section 482 of the Code of Criminal Procedure, affirming that the criminal proceedings should continue.